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Nobody knew Buffett and Munger had a 3rd partner and close friend. His name: Rick Guerin. Brilliant, rich, with an enviable track record. But one tragic mistake in 1973 cost him a fortune. His story: đ§ľ
In 1965-1983, Rick's partnership with Berkshire generated a compound return of 22,200%. He invested alongside them in the early days, making over $10 million through deep-value investing. For years, he was as rich (if not richer) than Buffett. So, where did it all go wrong?
Guerin wasnât just a brilliant stock pickerâhe was aggressive. Unlike Buffett and Munger, he used leverage to supercharge his returns. When the market was soaring in the late â60s, his net worth surged past $50 million. But then came the crash of 1973â74âŚ
Markets collapsed, he lost 42% in 1973 and 34% more in 1974. Margin calls rolled in. Guerin had to sell 6,000 shares of Berkshire Hathaway at ~$40 per share (and more) to stay afloat. Those shares would be worth over $3B today. Buffett later explained it:
âCharlie and I always knew that we would become incredibly wealthy. We were not in a hurry. Rick was just as smart as us, but he was in a hurry.â The market doesnât reward impatienceâit punishes it.
Munger called this the lesson of âToo much, too fast.â The paradox of investing: ⢠The people who get rich the fastest often lose it all. ⢠The people who get rich the slowest usually keep it forever.
Buffett and Munger had a simple rule: Never risk what you have for what you donât need. Guerinâs mistake was thinking short-term leverage could speed up long-term compounding. Instead, it destroyed him.
Buffettâs secret wasnât just picking great stocks. It was never being forced to sell them. ⢠No leverage. ⢠No margin calls. ⢠No panic selling. Just relentless patience.
Rick Guerin eventually rebuilt his wealth, reportedly amassing tens of millions again, but he never reached Buffettâs level. The same man who once invested alongside him was left watching from the sidelines. Because he was âin a hurry.â
The lesson: Wealth isnât just about picking great stocks. Itâs about surviving long enough to let compounding work its magic. Because the market doesnât care how smart you are. It only rewards those who can stay in the game.
Rick Guerinâs story is a painful reminder: ⢠Never use leverage on long-term investments. ⢠Never be in a hurry to get rich. ⢠Never put yourself in a position where you have to sell. Buffett & Munger took the slow path.
Weâre Zee and @thehowietan: ⢠Financially free investors ⢠Focused on asymmetry & risk management ⢠Sharing insights to help you build & repair your portfolio. Follow @kintsugiinvest for more. If this was useful, Like & Repost to share the insights. https://x.com/kintsugiinvest/s...
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